Media investors sue Wallace Bajjali

Investors who put millions of dollars into a failed media company are trying again to assert claims of fraud against a variety of individuals and businesses, including the master developer of Amarillo’s project to build a convention center hotel, stadium and parking garage.

In a civil lawsuit filed Thursday in Harris County, nearly 50 investors claim financial services agent Daniel Frishberg and others, including Wallace Bajjali Development Partners and its principals, fraudulently funneled millions of their investment dollars into a Business Radio Network Ponzi scheme.

Wallace Bajjali Development Partners and its principals, David Wallace and Costa Bajjali, have not yet filed an answer to the lawsuit.

The Sugar Land development firm is the master developer in a partnership with the city to build the three-pronged $113 million project downtown.

“We have not yet officially seen the litigation,” Wallace said Friday. “But we believe that this is the same lawyer and clients that previously filed suit 18 months ago, withdrew the suit a few days later, then filed suit seeking damages from Wallace Bajjali in another case.

“As the judge ruled against him and his clients, he filed a motion for the judge to reconsider. And when she again ruled against him and his clients, he then appealed to the 5th U.S. Circuit Court of Appeals, and again, the judge ruled against him until ultimately the appeals process was exhausted.”

Wallace was referring to failed attempts by Houston lawyer C. Thomas Schmidt to overturn a 2012 SEC settlement with Wallace Bajjali in a federal BizRadio case and Schmidt’s 2012 filing, and subsequent dropping, of a lawsuit over the same BizRadio investment claims.

BizRadio was at the center of a federal SEC investigation of Houston businessmen Albert Fase Kaleta and Frishberg. The SEC scrutinized Kaleta and Frishberg’s network of affiliated companies that shared office space and mixed and misappropriated investors’ money, according to court documents.

In addition to settling claims against Wallace Bajjali entities, the SEC-appointed receiver Thomas L. Taylor III also eventually settled claims with Kaleta and Frishberg.

The president of the city entity charged with managing the downtown redevelopment project on the city’s behalf said he’s not familiar with details of the lawsuit filed Thursday.

“However, I have asked our legal counsel involved in the downtown development efforts to take a look to see if there’s any relevance at all, regarding our (Amarillo) relations (with Wallace Bajjali) or if this is just a rehash of a previous dispute that seems to have been settled on a couple of occasions previously,” said Gary Pitner, president of Amarillo Local Government Corp.

Amarillo City Manager Jarrett Atkinson said Costa Bajjali contacted him to inform him about the lawsuit and he, too, has asked city legal advisers to review the filing to prepare information for the Amarillo City Council and LEG.

The investor lawsuit filed in Harris County District Court calls BizRadio “a financial disaster as a stand-alone entity, losing millions each year” and alleges it was purely a vehicle to draw customers to the investment businesses of its operators, Kaleta and Frishberg, as well as Wallace Bajjali entities.

The investors assert claims of negligent representation, breach of fiduciary duty, common law fraud, violations of the Texas Securities Act and civil conspiracy against individual plaintiffs, including Wallace Bajjali entities, and combinations of plaintiffs in the lawsuit.

“Defendants Frishberg, Wallace, Bajjali and (Arthur) Laffer marketed the WBL (Wallace Bajjali Laffer) Partnerships as vehicles for investment in allegedly high-quality, low-risk real estate when in fact a high percentage of these funds’ assets were ultimately invested into BizRadio,” the lawsuit claims.

The lawsuit alleges that, by 2007, $3.2 million had been plowed into BizRadio.

“The WBL Partnerships and their affiliates would eventually fraudulently invest many millions more of plaintiffs’ money into BizRadio,” the new lawsuit states.

The SEC settlement with Wallace Bajjali did not become final until after a September investor deadline for taking their objections to the U.S. Supreme Court.

Under that settlement, Wallace Bajjali and three of its real estate entities agreed to repay $879,176, plus interest, in loans they got from Kaleta’s Kaleta Capital Management, plus an additional $450,000. In November, U.S. District Judge Nancy F. Atlas approved a modification, moving the loan repayment deadline to Dec. 31.

Wallace and Bajjali also each agreed in May 2011 to pay about $60,000 in fines for exposing investors in struggling BizRadio to excessive risk, a situation Wallace blamed on the media company. Those fines have been paid, according to court records.

The developers asked Kaleta and Frishberg to solicit backers for two funds Wallace and Bajjali intended to invest in real estate and other projects, SEC documents said.

Instead, according to the SEC, more than $10 million from the funds controlled by Wallace and Bajjali went into BizRadio.

The amount exceeded, by almost $4 million, the investment limits set in written disclosures the developers made to investors.

On June 16, Judge Atlas approved a settlement setting a $1 million judgment against Frishberg that sets out a payment schedule for the judgment and monies owed to the IRS.

Claims in the SEC case against Kaleta were settled in May 2013. He also was ordered to pay a $1 million judgment and had to waive his right to have discharged the debts he owed when he filed for personal Chapter 7 bankruptcy in 2012, according to case documents.

City entities involved in downtown redevelopment efforts participated in 2011 in a complex process to vet Wallace Bajjali that turned up “no red flags” to prevent the city from entering a pact to explore development possibilities, Pitner said at the time.

A Dallas law firm hired by the city included examination of the SEC BizRadio lawsuit and other legal action involving Wallace Bajjali. The firm’s research was included in the city’s vetting of the development firm.

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Hasn't Amarillo seen enough in terms of our own Ponzi scheme artist Sterquell and his American Housing Foundation or do we need to go out of town to find another real estate maggot who has already been in the weeds with the SEC and investors who got scammed.

If this is the only taker on the convention hotel can we assume that real estate developers who are not guilty of SEC violations and involved in civil lawsuits, backed out because the project is not viable and only a group looking for cash infusion to cover other projects are willing to play.

If it looks like a duck, quacks like a duck and other people are shooting at it during duck season unless you want a duck it might be a good idea to look elsewhere before you choke on duck feathers. We shouldn't have to pay a law firm in Dallas to determine if or how big a crook we are getting in bed with. There are too many real estate development companies who haven't run afoul of the SEC and don't have 50 investors filing civil suits.

Question with boldness even the existence of a god; because if there be one he must approve of the homage of reason more than that of blindfolded fear. Thomas Jefferson in a letter to Peter Carr, August 10, 1787

Pointed the shady dealings the Bajjali had in past business deals but our city leaders went ahead and picked this crook anyway.

The city should look to a local hotel owning business like the Patel group who has built several local motels here in town. They live here, have a proven track record and have a vested interest in seeing Amarillo succeed.

As far as the due diligence/background work done on WB, I simply note that there are several excellent law firms in Amarillo (not me) that would have likely done a more thorough and comprehensive study. One in particular is routinely engaged by the FDIC because the firm does excellent work and, more importantly, gets excellent results. Amarillo dollars should stay in Amarillo, especially when we have such local talent.

First, bfielder is right. Not only did The Amarillo Independent do a comprehensive look at Wallace Bajjali’s background, but the City Council (Commission at the time) held off signing with W-B until it “vetted” them with a Dallas law firm. I cannot tell you if the Dallas firm was competent or politically motivated, but it basically discounted the past and pending legal actions against Wallace Bajjali. The City Council went ahead anyway, as you all know.

Second, the Chuck Patel, is part of the NewCrest group that has taken over the convention hotel in light of Wallace Bajjali’s failure to secure financing and missing two deadlines in its contract with the city, LGC and Downtown Amarillo, Inc. The Patels, with whom I am familiar in Amarillo, aren’t part of the same group as Newcrest. How related any Patel is to another is not clear.

Third, to clarify something from another story elsewhere on the Amarillo Globe-News website, there is no improvement for the Civic Center in Phase I or downtown development .Addressing the Civic Center and the issues of using the Herring Hotel are in Phase II — whatever the heck that means. By the way, many told the City Council at the time that the city should improve the Civic Center first and the time was right for a successful bond vote if only city officials would be honest with the voters about their plans.

Finally, this article contains little material information that is new. A lot of it is a rehash of old information. You should note that it ran on a Saturday (traditionally the day to downplay or bury news because few people read hard copy newspapers on Saturday). Draw your own conclusions about the tactics of a news outlet protecting a vested interest; but, I suspect this ran because the Amarillo Globe-News wants to say something like, “See, we are doing investigative reporting about Wallace Bajjali and downtown.”

Seriously, I am absolutely amazed this boondoggle is still in play. Between the obvious blatant fraud & corrupt WB Developer, AGN, DAI, City Commission...how does anyone with the intelligence of an amoeba not see the conflict of interest?!

When I brought up "the" David G Wallace's personal bankruptcy 4/28/88 filed in Dallas at one of the early Public Hearings, the "PR" brigade of Melissa Dailey & WB's "Point Man" found no humor. In fact, after the meeting I was approached by 3 different people with DAI & WB wanting to know where I had "heard" this. Told them I didn't "hear" it...but researched the information from the US Federal Records Center in Ft Worth:
Case # 388-32556
Transfer # 021-89-0143
Location # 2-11-208-4-3
Box # 29

The Taxpayers of Amarillo are absolutely going to get crushed on this already failed venture. Remember the Performing Arts Center? This boondoggle will make that look like the dollar menu from McD.

NewcrestImage is the Irving group which has been selected to own (with other investors) and operate the hotel. I believe they are the same group that owns the downtown Marriott which was restored. At this point, though, they have not signed anything to solidify the deal; that's supposedly delayed because of the ballpark/Coca-Cola issues. Some sort of changes in the hotel's plans were made at NewcrestImage's insistence, but those have not been made public, nor is there any information about their investors. I don't know if there is any information about the financial success of the Marriott property.